Practice Units

As part of LB&I's knowledge management efforts, Practice Units are developed through internal collaboration and serve as both job aids and training materials on tax issues. For example, Practice Units provide IRS staff with explanations of general tax concepts as well as information about a specific type of transaction. Practice Units will continue to evolve as the compliance environment changes and new insights and experiences are contributed. Please visit this site periodically for new and updated Practice Units which are shared below.

To provide feedback on a specific Practice Unit, please send an email to LBI Practice Unit Public Feedback and specify the Practice Unit’s name and Document Control Number (DCN), which are both listed on the Practice Unit’s cover page. Please do not reference a specific individual or entity in your email as comments may be subject to future release. The IRS does not commit to respond to suggestions or comments.

Practice Units are available in Adobe PDF and must be viewed with the Acrobat Reader.

NOTE: Practice Units are not official pronouncements of law or directives and cannot be used, cited or relied upon as such.  Practice Units provide a general discussion of a concept, process or transaction and are a means for collaborating and sharing knowledge among IRS employees.  Practice Units may not contain a comprehensive discussion of all pertinent issues, law or the IRS's interpretation of current law. Practice Units do not limit an IRS examiner’s ability to use other approaches when examining issues. Practice Units and any non-precedential material (e.g., a private letter ruling, determination letter, or Chief Counsel advice) that may be referenced in a Practice Unit may not be used or cited as precedent. References to third party service providers and documents, like news or journal articles, are for informational purposes only and do not constitute an endorsement of any vendor, document, or the services or views offered by such third party.

2019
09-06-2019 French Foreign Tax Credits (PDF) 126 KB
07-31-2019 Source of Income for Nonresident Alien Individuals (PDF) 133 KB
06-13-2019 Allocation of Success-Based Fees in a Covered Transaction (PDF) 187KB
05-10-2019 Transaction Costs in a Corporate Separation (PDF) 275KB
04-30-2019 Shipping and Air Transport Article Overview (PDF) 100KB
04-05-2019 Interest Capitalization for Self-Constructed Assets (PDF) 707KB
04-05-2019 Land Developers and Subcontractors -Proper Method of Accounting (PDF) 122KB
04-05-2019 Tax Home for Purposes of IRC Section 911(PDF) 79KB
03-21-2019 Competent Authority Revenue Procedure 2015-40 Guidance: Foreign-Initiated Adjustment(s) (PDF) 222KB
03-15-2019 Introduction to Traditional Automatic Exchange of Information (PDF) 73KB
03-08-2019 Competent Authority Process Under a MAP Article of a U.S. Income Tax Treaty (PDF) 246KB 
02-26-2019 Self-Employment Tax and Partners (PDF) 122 KB
01-29-2019 Creation of a Permanent Establishment (PE) through the Activities of a Dependent Agent in the United States (PDF) 162KB
01-29-2019 Preparatory and Auxiliary Treaty Exception to Permanent Establishment Status (PDF) 120KB
01-28-2019 IRC 179D Energy Efficient Commercial Buildings Deduction (PDF) 233KB
2018
11-05-2018 Identifying a Taxpayer Electing a Partial Disposition of a Building (PDF) 131KB
09-06-2018 Determining an Individual’s Residency for Treaty Purposes (PDF) 320KB
07-18-2018 Examining a Transaction Costs Issue (PDF) 212KB
05-14-2018 ASC 730 Research and Development - How It Relates to IRC 41 and 174 (PDF) 196KB
05-14-2018 ASC 730 Directive - Computing Qualified Research Expenses (PDF) 297KB
05-14-2018 Disposition of Nonfunctional Currency (PDF) 221KB
04-30-2018 Losses Claimed in Excess of Basis (PDF) 457KB
04-30-2018 Examining the Qualifying Advanced Energy Project Credit (PDF) 222KB
04-17-2018 Exhaustion of Administrative Remedies (PDF) 174KB
04-12-2018 General Deductions of a Foreign Corporation Engaged in U.S. Trade or Business (Non Treaty) (PDF) 151 KB
04-12-2018 Reduced Foreign Taxes Under Treaty Provisions (PDF) 104 KB
03-08-2018 Valid Shareholder Debt Owed by S Corporation (PDF) 130KB
02-28-2018 Functional Currency of a QBU (PDF) 144KB
02-08-2018 Definition of Foreign Personal Holding Company Income and the Common Exceptions (PDF) 160KB
02-02-2018 Adjustments to Debt Basis (PDF) 564KB
01-11-2018 Stock Basis Ordering Rules (PDF) 86KB
01-10-2018 U.S. Territories - Self-Employment Tax (PDF) 90KB
01-02-2018 Substantial Contribution Test for CFC Manufacturing Exception (PDF) 169KB
2017
12-14-2017 Initial Stock Basis (PDF) 108KB
12-13-2017 Calculation of the IRC 956 Inclusion (PDF) 316KB
12-7-2017 Employee Share of Employment Taxes - U.S. Citizens and Resident Aliens Working Abroad (PDF)  105KB
12-7-2017 U.S. Persons Residing Abroad Claiming Additional Child Tax Credit (PDF)  152KB
11-21-2017 Common Ownership or Control Under IRC 482 - Inbound (PDF)  191KB
11-21-2017 Common Ownership or Control Under IRC 482 - Outbound (PDF)  205KB
11-20-2017 Adjustments to Stock Basis (PDF) 186KB
11-06-2017 Advance Pricing Agreement for Tangible Goods Transactions –Inbound (PDF) 386KB
11-06-2017 Advance Pricing Agreement for Tangible Goods Transactions –Outbound (PDF) 319KB
10-19-2017 Overview of Withholding Under FIRPTA for Sales by Individuals (PDF) 151KB
10-17-2017 Overview of Entity Classification Regulations (a/k/a Check-the-Box) (PDF) 186KB
10-17-2017 U.S. Real Property Holding Corporations - USRPHC Status (PDF) 136KB
10-10-2017 Failure to File the Form 5471 – Category 2 and 3 Filers – Monetary Penalty (PDF) 259KB
09-15-2017 Competent Authority Revenue Procedure 2015-40 Guidance: U.S.-Initiated Adjustment(s) (PDF) 325KB
09-15-2017 High Value Services: Technical and Marketing Fees – Inbound (PDF) 261KB
09-14-2017 Creditable Foreign Taxes (PDF) 117KB
09-14-2017 Sourcing of Income (PDF) 253KB
09-14-2017 Verifying Refund Requests of IRC 1441 Withholding on FDAP Income (PDF) 242KB
06-16-2017 The Meaning of “Substantially Complete” with Reference to International Information Return Penalties (PDF) 144KB
06-06-2017 Functional Currency Determination (PDF) 118KB

04-24-2017

Physical Presence Test for Purposes of Qualifying for IRC 911 Tax Benefits (PDF)

173KB

04-21-2017

Overview – Expense Allocation/Apportionment in Calculation of the IRC 904 FTC Limitation (PDF)

 181KB

04-11-2017

FTC General Principles (PDF)

138KB

03-01-2017

Summary of Foreign and Domestic Loss Impacts on the Foreign Tax Credit (PDF)

185KB

02-14-2017

Hedge Fund Basics (PDF)

179KB

02-14-2017

Monetary Penalties for Failure to Timely File a Complete and Accurate Form 8865 – Category 1 & 2 Filers (PDF)

277KB

01-31-2017

Basket Transactions (PDF)

194KB

01-30-2017

Exchange Gains/Losses on Payables and Receivables Denominated in a Nonfunctional Currency (PDF)

164KB

01-30-2017

Official versus Free Market Exchange Rate (PDF)

107KB

01-30-2017

Sourcing of Exchange Gains or Losses in Currency Transactions (PDF)

120KB

01-30-2017

How to Assess Penalties for Failure to File Form 8886 Disclosing IRC 988 losses (PDF)

191KB

01-30-2017

Using an IRC 6038A Summons when a U.S. Corporation is 25% Foreign Owned (PDF)

437KB

01-04-2017

IRC 367(d) Transactions in Conjunction with Cost Sharing Arrangements (CSA) (PDF)

386KB

2016

11-14-2016

Employee Share of Employment Taxes - U.S. Citizens and Resident Aliens Working Abroad (PDF)

121KB

11-14-2016

Self-Employment Taxes - U.S. Citizens and Resident Aliens Working Abroad (PDF)

114KB

11-08-2016

Portfolio Debt Exemption – Requirements and Exceptions (PDF)

223KB

10-13-2016

Identifying Foreign Goodwill or Going Concern (PDF)

544KB

09-23-2016

Sourcing of Multi-Year Compensation Arrangements Including Stock Options for FTC Limitation (PDF)

139KB

09-23-2016

Comparison of the Arm’s Length Standard with Other Valuation Approaches – Outbound (PDF)

117KB

09-23-2016

Comparison of the Arm’s Length Standard with Other Valuation Approaches – Inbound (PDF)

116KB

8-23-2016

Taxation on the Disposition of USRPI by Foreign Persons (PDF)

204KB

08-19-2016

Calculating Foreign Earned Income Exclusion – Partner in a Partnership with Foreign Earned Income (PDF)

311KB

08-19-2016

Foreign Housing Deduction (IRC 911) (PDF)

255KB

07-20-2016

Overview of Qualified Business Units (QBUs) (PDF)

460KB

07-20-2016

Overview of IRC Section 988 Nonfunctional Currency Transactions (PDF)

525KB

07-20-2016

Character of Exchange Gain or Loss on Currency Transactions (PDF)

175KB

07-15-2016

FDAP Payments – Source of Income (PDF)

115KB

07-08-2016

Foreign Housing Exclusion (IRC § 911) (PDF)

240KB

07-05-2016

Corporate Inversions - Overview of Major Issues (PDF)

292KB

06-14-2016

Failure to File the Form 926 – Return by a U.S. Transferor of Property to a Foreign Corporation – Monetary Penalty (PDF)

398KB

06-02-2016

FDAP Withholding Under Chapter 3 (PDF)

260KB

05-12-2016

Taxpayer’s Affirmative Use of IRC 482 (PDF)

214KB

04-06-2016

Three Requirements of IRC 482 (PDF)

246KB

03-18-2016

Inbound Resale Price Method Routine Distributor (PDF)

264KB

03-18-2016

Computing Foreign Base Company Income for US Individual Shareholders (PDF)

185KB

03-17-2016

Concepts of Foreign Personal Holding Company Income (PDF)

157KB

03-17-2016

Verifying Refund Request of IRC 1445 Withholding on Dispositions of U.S. Real Property Interests (PDF)

265KB

03-14-2016

Interest Expense Limitation Computation under §163(j) (PDF)

354KB

03-09-2016

Allocation and Apportionment of Deductions for Nonresident Alien Individuals (PDF)

3,732KB

03-09-2016

FDAP Income (PDF)

322KB

03-07-2016

Residual Profit Split Method - Outbound (PDF)

395KB

03-04-2016

Review of Transfer Pricing Documentation by *Outbound Taxpayers (PDF)

529KB

03-04-2016

Outbound Services by US Companies to CFCs (PDF)

247KB

02-19-2016

Outbound Transfer of Foreign Stock Followed by Check-The-Box Election (PDF)

351KB

02-19-2016

Residual Profit Split Method - Inbound (PDF)

381KB

02-19-2016

Revenue Procedure 99-32 Inbound Guidance (PDF)

443KB

02-19-2016

Interest Expense of a Foreign Corporation Engaged in a U.S. Trade/Business (Non-Bank, Non-Treaty) (PDF)

291KB

02-19-2016

Gross Effectively Connected Income (ECI) of a Foreign Corporation (Non-Treaty) (PDF)

225KB

02-19-2016

Interest Expense of US Branch of a Foreign Bank Non-Treaty (PDF)

254KB

02-19-2016

Calculating the Net Adjustment Penalty for a Substantial Valuation Misstatement (PDF)

330KB

02-12-2016

Non-Services FDAP Income (PDF)

300KB

02-09-2016

Receipt of Dividends or Interest from a Related CFC (PDF)

244KB

02-08-2016

Outbound Transfer of Domestic Stock (PDF)

325KB

02-08-2016

Pricing of Platform Contribution Transaction (PCT) in Cost Sharing Arrangements (CSA) Acquisition of Subsequent IP (PDF)

334KB

02-04-2016

Outbound Transfer of Foreign Stock (PDF)

417KB

02-04-2016

Change in Participation in a Cost Sharing Arrangement (CSA) – Controlled Transfer of Interest and Capability Variation (PDF)

411KB

01-21-2016

Concepts of Foreign Base Company Sales Income (PDF)

418KB

01-20-2016

Overview of Exchange of Information Programs (PDF)

137KB

01-20-2016

Types of EOI Exchanges (PDF)

152KB

01-20-2016

Field Procedures for Handling Foreign Initiated “Specific” Requests under EOI Agreements (PDF)

189KB

2015

12-01-2015

Basic Offshore Structures Used to Conceal U.S. Person’s Beneficial Ownership of Foreign Financial Accounts and Other Assets (PDF)

372KB

12-01-2015

Defining the Entity – Foreign Trusts (PDF)

453KB

12-01-2015

Foreign Grantor Trust Determination – Part II – Sections 671-678 (PDF)

675KB

12-01-2015

Foreign Grantor Trust Determinations – Part I – Section 679 (PDF)

673KB

11-23-2015

Failure to File the Form 3520/3520-A - Penalties (PDF)

210KB

11-23-2015

Failure to File the Form 8865 – Category 1 and 2 Filers – Monetary Penalty (PDF)

308KB

11-23-2015

Foreign Partnership – Taxation (PDF)

289KB

11-13-2015

Overview of Subpart F Income for U.S. Individual Shareholders (PDF)

265KB

11-12-2015

Failure to File the Form 5471 – Category 4 and 5 Filers – Monetary Penalty (PDF)

335KB

11-12-2015

Determination of U.S. Shareholder and CFC Status (PDF)

245KB

11-04-2015

License of Intangible Property from U.S. Parent to a Foreign Subsidiary (PDF)

268KB

11-04-2015

Deemed Annual Royalty Income Under IRC 367(d) (PDF)

321KB

10-29-2015

Definition of Appropriate Exchange Rate Overview (PDF)

184KB

10-29-2015

Sale by CFC to Unrelated Parties of Products Manufactured by Branch (PDF)

225KB

10-29-2015

Identification of a U.S. Trade or Business of a Nonresident Alien (PDF)

199KB

10-29-2015

Conducting Functional Analysis for Foreign Base Company Income (FBCI) (PDF)

168KB

10-29-2015

Concepts of Foreign Base Company Services Income (PDF)

200KB

10-29-2015

Branch Rules for Foreign Base Company Sales Income (PDF)

222KB

10-29-2015

Branch Sales to Unrelated Parties of Products Manufactured by CFC (PDF)

216KB

10-22-2015

Monetary Penalties for Failure to Timely File a Substantially Complete Form 5471 --Category 4 & 5 Filers (PDF)

454KB

10-22-2015

Using an Authorization of Agent when a US Corporation is 25% Foreign Owned (PDF)

400KB

10-22-2015

Using Alternative Means to Obtain Foreign Based Evidence (PDF)

338KB

10-01-2015

Treaty Exemption of Income from Teaching (PDF)

348KB

09-10-2015

Inbound Liquidation of a Foreign Corporation into a U.S. Corporate Shareholder (PDF)

421KB

09-09-2015

Accounting for Intangibles and Services Associated with the Sale of Tangible Property - Outbound (PDF)

371KB

08-28-2015

Foreign-To-Foreign Transactions – IRC 367(b) Overview (PDF)

457KB

08-28-2015

Overview of IRC 482 (PDF)

485KB

08-21-2015

Short Term Loan Exclusion from United States Property (PDF)

350KB

08-21-2015

Bona Fide Residence Test for Purposes of Qualifying for IRC § 911 Tax Benefits (PDF)

187KB

08-21-2015

U.S. Persons Residing Abroad Claiming Additional Child Tax Credit (PDF)

175KB

08-21-2015

Calculating Foreign Earned Income Exclusion -Self-Employed Individual (PDF)

188KB

08-21-2015

Sourcing of Fringe Benefits for FTC Limitation (PDF)

316KB

08-21-2015

U.S. Territories – Determining Bona Fide Residency Status (PDF)

275KB

08-21-2015

Sourcing of Salary and Compensation (PDF)

278KB

08-21-2015

Calculating Foreign Earned Income Exclusion -Employee (PDF)

174KB

08-21-2015

Payee Documentation for Treaty Benefits (PDF)

360KB

08-21-2015

Effectively Connected Income (ECI) (PDF)

183KB

08-04-2015

Branch-Level Interest Tax Concepts (PDF)

776KB

07-17-2015

CFC Purchased From Related Party with Same Country Sales (PDF)

250KB

07-17-2015

CFC Sale to Related Party With Same Country Unrelated Party Manufacturing (PDF)

246KB

2014

12-15-2014

Interest Income Derived by CFC or QBU Engaged in Banking Financing or Similar Business (PDF)

548KB

12-15-2014

Computing Foreign Base Company Income (PDF)

287KB

12-15-2014

Subpart F Overview (PDF)

279KB

12-15-2014

Disposition of a Portion of an Integrated Hedge (PDF)

430KB

12-15-2014

Asset Valuation using the FMV Method for Interest Expense Allocation to Calculate FTC Limitation (PDF)

350KB

12-15-2014

Overview of Interest Expense Allocation and Apportionment in Calculation of the FTC Limitation (PDF)

217KB

12-15-2014

Exhaustion of Remedies (PDF)

566KB

12-15-2014

Exhaustion of Remedies and Transfer Pricing (PDF)

611KB

12-15-2014

Exhaustion of Remedies in Non Transfer Pricing Situations (PDF)

632KB

12-15-2014

How to Allocate and Apportion Research and Experimental Expenses (PDF)

216KB

12-15-2014

Issuing a Formal Document Request when a US Taxpayer is Unresponsive to an IDR (PDF)

503KB

12-15-2014

Section 861 Home Office and Stewardship Expenses (PDF)

374KB

12-15-2014

License of Foreign Owned Intangible Property by US Entity (PDF)

334KB

12-15-2014

Management Fees (PDF)

331KB

12-15-2014

Purchase of Tangible Goods from a Foreign Parent CUP Method (PDF)

711KB

12-15-2014

CPM Simple Distributor Inbound (PDF)

354KB

12-15-2014

Foreign Shareholder Activities and Duplicative Services (PDF)

511KB

12-15-2014

Best Method Determination for an Inbound Distributor (PDF)

567KB

12-15-2014

Services Cost Method Inbound Services (PDF)

293KB

12-15-2014

Arms Length Standard (PDF)

600KB

12-15-2014

Outbound Liquidation of US Corp to Foreign Parent IRC Section 367 e 2 Overview (PDF)

1,038KB

12-15-2014

Comparability Analysis for Tangible Goods Transactions Inbound (PDF)

541KB

12-15-2014

Review of Transfer Pricing Documentation by Inbound Taxpayers (PDF)

454KB

12-15-2014

Pricing of Platform Contribution Transaction in Cost Sharing Arrangements Initial Transaction (PDF)

478KB

12-15-2014

Cost Sharing Arrangements vs Licensing Alternative (PDF)

442KB

12-15-2014

Distinguishing Between Sale License and other Transfers of Intangibles to CFCs by US Transferors (PDF)

509KB

12-15-2014

Sale of Tangible Goods from a CFC to a USP CUP Method (PDF)

360KB

12-15-2014

CPM Simple Distributor Outbound (PDF)

534KB

12-15-2014

Revenue Procedure 99-32 Outbound Guidance (PDF)

707KB

12-15-2014

Outbound Transfers of Property to Foreign Corporation - IRC Section 367 Overview (PDF)

788KB

12-15-2014

Dual Consolidated Losses Overview (PDF)

838KB

12-15-2014

Comparability Analysis for Tangible Goods Transactions Outbound (PDF)

435KB

12-15-2014

Determining Tax Residency Status of Lawful Permanent Residents (PDF)

450KB

12-15-2014

Substantial Presence Test (PDF)

498KB

12-15-2014

Election under Section 6013g (PDF)

348KB

12-15-2014

Election under Section 6013h (PDF)

434KB

12-15-2014

First Year Election under 7701b4 (PDF)

471KB

12-15-2014

IRC 911 Election and Revocation (PDF)

100KB

12-15-2014

Branch Profits Tax Concepts (PDF)

543KB

12-15-2014

Qualification for Treaty Benefits under the Publicly Traded Test (PDF)

608KB

12-15-2014

Creation of a Permanent Establishment through the Activities of Seconded Employees in the United States (PDF)

702KB

12-15-2014

Overview of FDAP (PDF)

306KB